Hitachi and Western Digital Suffered Most from Thailand Flood - Analysts.

Based on new rankings for the market of hard disk drives, it appears that Hitachi Global Storage Technologies and Western Digital suffered the most from the severe flood in Thailand that occurred in October, 2012. As a result, Seagate Technologies managed to move up in rankings to No. 1 and No. 3 spots, respectively, according to IHS iSuppli.

Seagate and Toshiba Boost Relative Leadership Positions

Seagate Technology recaptured the lead in hard disk drive (HDD) shipments during the fourth quarter of 2011, ousting Western Digital Corp., which suffered heavy losses in the devastating Thailand floods last year.

“Seagate owes its return to market leadership to a fortuitous accident in geography: Its HDD manufacturing plant in Thailand is located on high ground,” observed Fang Zhang, analyst for storage systems at IHS.

As previously reported, in the final quarter of 2011, Seagate shipped 46.9 million HDD units worldwide, compared to 28.5 million for archrival Western Digital, according to an IHS iSuppli. Seagate suffered a relatively minimal sequential shipment decline of 8% compared to third-quarter figures of 50.8 million units. Western Digital, in contrast, took a massive blow as shipments fell 51% from 57.8 million units in the earlier quarter.

To sum up, HDD shipments from the industry’s five major manufacturers retreated sharply in the fourth quarter to 123.3 million units, down 30% from 175.2 million units the quarter before. Along with Seagate and Western Digital, major players such as Toshiba, Hitachi Global Storage Technologies and Samsung Electronics also posted shipment declines.

The new rankings mean that Seagate in the fourth quarter controlled 38% of overall HDD shipments, with Western Digital coming in a distant second at 23%. Toshiba had 16%, followed by Hitachi GST (HGST) with 14% and Samsung with 9%.

Moving forward, the two HDD titans will continue to battle for the No. 1 spot. Both companies also are engaging in mergers - Seagate with Samsung and Western Digital with Hitachi GST - which would have the general effect of intensifying rivalry between the two.

Gross Margins and Average Selling Prices Rise in Q4

Despite the flood, both Seagate and Western Digital saw their gross margins rise to record highs in the fourth quarter, due to across-the-board price increases in the wake of flood-related HDD shortages. Both companies also reported profits.

Seagate, which had a long-term goal to reach gross margins in the 22% to 26% range, actually achieved the 32% level in the fourth quarter, thanks to higher average selling prices (ASP) of HDDs. Seagate’s ASP surged from $55 in the third quarter to $68 in the fourth, a strong 24% upswing.

Western Digital also attained a company record with gross margins at 32.5% during the same period, after its ASP soared to $69, up from $46. Given the expected HDD shortages for the first half of this year and Western Digital’s long road to recovery, Seagate’s gross margin is expected to remain at the 30% level throughout 2012.

Nonetheless, general pricing will start to decline at the end of Q1 2012 for some HDD products, with component shortages finally easing and production increases kicking in from plants that had escaped flooding. Still, pricing is not expected to return to preflood levels anytime soon, especially because there will be fewer manufacturers left after both Seagate and Western Digital complete their acquisitions of Samsung and HGST, respectively. Also, higher pricing can be expected with relocation of HDD production following the flood, increased component costs from makers impacted by the flood, and high costs in general associated with the continuing development of high-tech drives.